Research

Abstract: This paper examines how eight episodes of high inflation in several middle-income economies since the 1980s were brought to an end through decisive fiscal consolidation. While standard theories attribute delayed stabilization to political "wars of attrition" or political myopia, we show that the delay can be explained by a rational optimization process under uncertainty. Because institutional reforms such as currency boards or dollarization impose high costs on future policy discretion, governments in chronic inflation regimes often seek to stabilize using the minimum sufficient level of commitment to stabilize expectations. We document a pattern of "learning" in several chronic inflation episodes (e.g., Brazil, Argentina, Turkey) where governments initially experimented with weak constraints and progressed to hard commitment devices only after cheaper options failed. In cases of explosive hyperinflation (e.g., Bolivia, Poland), this learning process was compressed, forcing an immediate adoption of high-commitment technologies. Empirically, we find that policy rates frequently violated the Taylor principle during successful transitions, reinforcing that durable price stability relied not on interest-rate rules, but on the institutional and fiscal reforms that made reverting to deficit monetization prohibitively expensive.

Abstract: Because CPI is observed only monthly, inflation risk behaves as a special case of a jump diffusion process that continuous trading in bonds, the underlying, and derivatives cannot span. I show that Kalshi’s CPI prediction markets allow this jump risk to be hedged by delivering state-contingent claims on the realized jump outcome.Full market completeness requires an infinite set of Arrow securities in principle, but in practice two conditions allow us to collapse the state space: (i) agents evaluate inflation outcomes only at coarse resolution, so the relevant $\sigma$-algebra is generated by partitions at that granularity, and (ii) jump sizes are bounded.Calibrating this coarser payoff space and proving reasonable bounds for jump sizes shows that a finite set of strikes provided by the market can itself span the economically relevant outcomes.I close with implications for strike design, market depth, and regulatory considerations, and highlight the broader potential of prediction markets as a foundation for state-contingent self-insurance across states in other markets.

Undergraduate Honors Thesis under supervision of Barry Jones.

Abstract: I extend Calvo and Velasco's (2022) model of monetary-fiscal coordination by incorporating explicit active (non-Ricardian) and passive (Ricardian) fiscal policy rules, following Leeper (1991). This extension provides richer bond price dynamics, revealing additional scenarios requiring policy coordination, while overturning others. Using analytical solutions to the model's differential equations, I demonstrate that monetary intervention is only necessary under non-Ricardian fiscal policy, while Ricardian fiscal policy is neutral. While this finding overturns some of Calvo and Velasco's results, it maintains the broader flavor about the interconnectedness of monetary and fiscal policy. The model provides insights into policy responses during the Covid-19 pandemic and offers a framework for analyzing future crisis responses.

Using a comprehensive dataset of U.S. Treasury securities dating back to 1776, I examined how the Louisiana Purchase bonds— which expanded U.S. debt by approximately 20% (equivalent to 95% of annual government revenues)—set a precedent for U.S. sovereign debt as a global financial instrument. Unlike most pre-1920 U.S. bonds, which were illiquid and uniquely tailored to congressional authorizations, these bonds achieved unprecedented international marketability, trading in London, Paris, and Amsterdam. Facilitated by international merchant banks, this innovative structure enabled the U.S. to execute a massive financial expansion while maintaining fiscal credibility. This episode marked a key developmental stage in the evolution of U.S. Treasuries into the world’s predominant safe asset, illustrating how institutional credibility and strategic financial engineering can enable large-scale national expansion without destabilizing debt markets. This work was published as a Jupyter Notebook and can be accessed on Tom's website. 

Presented at 49th Annual Northeast Business and Economic Association Conference Proceedings, 2022, November.